CHICO'S FAS, INC. FORT MYERS, Fla., Aug. 27, 2014 /PRNewswire/ -- Chico's FAS, Inc. (NYSE: CHS) today announced its financial results for the fiscal 2014 second quarter and twenty-six weeks ended August 2, 2014.
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For the thirteen weeks ended August 2, 2014 (the second quarter), the Company reported net income of $30.1 million compared to net income of $43.6 million for the thirteen weeks ended August 3, 2013, and second quarter 2014 earnings per diluted share of $0.20 compared to earnings per diluted share of $0.27 in last year's second quarter.
For the twenty-six weeks ended August 2, 2014, the Company reported net income of $70.0 million compared to net income of $94.7 million in the same period last year, and earnings per diluted share of $0.46 compared to earnings per diluted share of $0.58 in the same period last year.
Net Sales
For the second quarter, net sales were $671.1 million, an increase of 3.3% compared to $649.5 million in last year's second quarter, primarily reflecting 98 net new stores for a square footage increase of 6.4% and comparable sales growth of 0.3%, partially offset by a $4.4 million decrease in Boston Proper net sales. The 0.3% increase in comparable sales for the second quarter was following a 2.6% decrease in last year's second quarter, and reflected an increase in transaction count partially offset by a decrease in average dollar sale.
For the second quarter, the Chico's/Soma Intimates brands' comparable sales increased 1.4% following a 3.1% decrease in last year's second quarter. The Chico's brand experienced an increase of slightly less than 1% in comparable sales in the second quarter compared to a mid-single digit decrease in last year's second quarter, and the Soma Intimates brand experienced a mid-single digit comparable sales increase in the second quarter compared to a high-single digit increase in last year's second quarter. The White House | Black Market brand's comparable sales decreased 1.9% following a 1.5% decrease in last year's second quarter.
Gross Margin
For the second quarter, gross margin was $351.5 million compared to $356.1 million in last year's second quarter. Gross margin was 52.4% of net sales, a 240 basis point decrease from last year's second quarter, primarily reflecting increased promotional activity in fiscal 2014 to sell through seasonal merchandise.
Selling, General and Administrative Expenses
For the second quarter, selling, general and administrative expenses ("SG&A") were $304.7 million compared to $286.3 million in last year's second quarter. SG&A was 45.4% of net sales, a 140 basis point increase from last year's second quarter, primarily reflecting sales deleverage of store expenses, costs to support new store growth and the impact of approximately $5 million in incremental investment spending on strategic initiatives.
Income Tax Provision
For the second quarter, the effective tax rate was 35.5%, compared to an effective tax rate of 37.7% in last year's second quarter, primarily reflecting favorable state tax settlements.
Inventories
At the end of the second quarter of 2014, total inventories per selling square foot increased 2.5%, excluding in-transit inventories. The increase primarily reflects a slightly higher average unit cost for inventories on hand and forward fabric commitments. In-transit inventories increased by $11.2 million, primarily reflecting an increase in the amount and timing of shipping via ocean compared to 2013.
Share Repurchase Program
During the second quarter of fiscal 2014, the Company repurchased 0.6 million shares for $10.0 million under its $300 million share repurchase program announced in December 2013. During the twenty-six weeks ended August 2, 2014 and August 3, 2013, the Company repurchased a total of 0.6 million shares for $10.0 million and 4.9 million shares for $85.0 million, respectively, with $290 million remaining under the program as of the end of the second quarter of fiscal 2014.
ABOUT CHICO'S FAS, INC.
The Company, through its brands - Chico's, White House | Black Market, Soma Intimates, and Boston Proper, is a leading omni-channel specialty retailer of women's private branded, sophisticated, casual-to-dressy clothing, intimates, complementary accessories, and other non-clothing items.
As of August 2, 2014, the Company operated 1,525 stores in the US and Canada and sold merchandise through franchise locations in Mexico. The Company's merchandise is also available at www.chicos.com, www.whbm.com, www.soma.com, and www.bostonproper.com. For more detailed information on Chico's FAS, Inc., please go to our corporate website at www.chicosfas.com.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Certain statements contained herein, including without limitation, statements addressing the beliefs, plans, objectives, estimates or expectations of the Company or future results or events constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements involve known or unknown risks, including, but not limited to, general economic and business conditions, and conditions in the specialty retail industry. There can be no assurance that the actual future results, performance, or achievements expressed or implied by such forward-looking statements will occur. Users of forward-looking statements are encouraged to review the Company's latest annual report on Form 10-K, its filings on Form 10-Q, management's discussion and analysis in the Company's latest annual report to stockholders, the Company's filings on Form 8-K, and other federal securities law filings for a description of other important factors that may affect the Company's business, results of operations and financial condition. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized.
(Financial Tables Follow)
Executive Contact:
Dave Slater
Vice President - Investor Relations
Chico's FAS, Inc.
(239) 346-4199
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
-------------- -------------- -------------- --------------
Amount % of Amount % of Amount % of Amount % of
Sales Sales Sales Sales
-----
Net sales:
Chico's/Soma Intimates $872,009 64.4% $839,395 63.6% $431,888 64.3% $414,734 63.8%
White House | Black Market 431,087 31.9% 425,488 32.2% 213,914 31.9% 205,090 31.6%
Boston Proper 49,639 3.7% 55,342 4.2% 25,328 3.8% 29,679 4.6%
------ --- ------ --- ------ --- ------ ---
Total net sales 1,352,735 100.0% 1,320,225 100.0% 671,130 100.0% 649,503 100.0%
Cost of goods sold 618,372 45.7% 577,239 43.7% 319,658 47.6% 293,361 45.2%
------- ---- ------- ---- ------- ---- ------- ----
Gross margin 734,363 54.3% 742,986 56.3% 351,472 52.4% 356,142 54.8%
Selling, general and administrative expenses 623,786 46.1% 591,161 44.7% 304,737 45.4% 286,262 44.0%
Acquisition and integration costs - 0.0% 914 0.1% - 0.0% - 0.0%
--- --- --- --- --- --- --- ---
Income from operations 110,577 8.2% 150,911 11.5% 46,735 7.0% 69,880 10.8%
Interest income (expense), net 31 0.0% 299 0.0% (9) 0.0% 108 0.0%
--- --- --- --- --- --- --- ---
Income before income taxes 110,608 8.2% 151,210 11.5% 46,726 7.0% 69,988 10.8%
Income tax provision 40,600 3.0% 56,500 4.3% 16,600 2.5% 26,400 4.1%
------ --- ------ --- ------ --- ------ ---
Net income $70,008 5.2% $94,710 7.2% $30,126 4.5% $43,588 6.7%
======= === ======= === ======= === ======= ===
Per share data:
Net income per common share-basic $0.46 $0.58 $0.20 $0.27
===== ===== ===== =====
Net income per common and common $0.46 $0.58 $0.20 $0.27
equivalent share-diluted
Weighted average common shares outstanding- 148,584 157,379 148,694 156,589
basic
Weighted average common and common 149,127 158,322 149,218 157,573
equivalent shares outstanding-diluted
Dividends declared per share $0.225 $0.165 $0.075 $0.055
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Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
(in thousands)
August 2, February 1, August 3,
2014 2014
2013
----
ASSETS
Current Assets:
Cash and cash equivalents $114,387 $36,444 $93,417
Marketable securities, at fair value 94,276 116,002 208,434
Inventories 238,072 238,145 211,148
Prepaid expenses and other current assets 50,744 50,698 57,492
------ ------ ------
Total Current Assets 497,479 441,289 570,491
Property and Equipment, net 635,651 631,050 622,708
Other Assets:
Goodwill 171,427 171,427 238,693
Other intangible assets, net 116,017 118,196 125,988
Other assets, net 10,828 9,229 8,212
------ ----- -----
Total Other Assets 298,272 298,852 372,893
------- ------- -------
$1,431,402 $1,371,191 $1,566,092
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $156,091 $131,254 $139,727
Other current and deferred liabilities 140,545 142,073 140,197
------- ------- -------
Total Current Liabilities 296,636 273,327 279,924
Noncurrent Liabilities:
Deferred liabilities 141,704 138,874 141,708
Deferred taxes 47,441 49,887 51,018
------ ------ ------
Total Noncurrent Liabilities 189,145 188,761 192,726
Stockholders' Equity:
Preferred stock - - -
Common stock 1,530 1,522 1,609
Additional paid-in capital 393,031 382,088 366,032
Retained earnings 551,003 525,381 725,736
Accumulated other comprehensive income 57 112 65
--- --- ---
Total Stockholders' Equity 945,621 909,103 1,093,442
------- ------- ---------
$1,431,402 $1,371,191 $1,566,092
========== ========== ==========
Chico's FAS, Inc. and Subsidiaries
Condensed Consolidated Cash Flow Statements
(Unaudited)
(in thousands)
Twenty-Six Weeks Ended
----------------------
August 2, August 3,
2014 2013
---- ----
Cash Flows From Operating Activities:
Net income $70,008 $94,710
Adjustments to reconcile net income to net cash provided by operating activities -
Depreciation and amortization 60,373 58,628
Deferred tax (benefit) expense (4,443) 3,556
Stock-based compensation expense 12,684 14,304
Excess tax benefit from stock-based compensation (1,196) (1,437)
Deferred rent and lease credits (9,221) (8,602)
Loss on disposal and impairment of property and equipment 209 753
Changes in assets and liabilities:
Inventories 73 (4,299)
Prepaid expenses and other assets (1,645) (2,568)
Accounts payable 13,346 1,483
Accrued and other liabilities 12,952 (13,491)
------ -------
Net cash provided by operating activities 153,140 143,037
------- -------
Cash Flows From Investing Activities:
Purchases of marketable securities (42,700) (60,128)
Proceeds from sale of marketable securities 64,407 124,042
Purchases of property and equipment, net (62,966) (71,745)
------- -------
Net cash used in investing activities (41,259) (7,831)
------- ------
Cash Flows From Financing Activities:
Proceeds from issuance of common stock 4,297 7,900
Excess tax benefit from stock-based compensation 1,196 1,437
Dividends paid (22,901) (17,777)
Repurchase of common stock (16,527) (90,208)
------- -------
Net cash used in financing activities (33,935) (98,648)
------- -------
Effects of exchange rate changes on cash and cash equivalents (3) -
--- ---
Net increase in cash and cash equivalents 77,943 36,558
Cash and Cash Equivalents, Beginning of period 36,444 56,859
------ ------
Cash and Cash Equivalents, End of period $114,387 $93,417
======== =======
Supplemental Detail on Earnings Per Share Calculation
In accordance with accounting guidance, unvested share-based payment awards that include non-forfeitable rights to dividends, whether paid or unpaid, are considered participating securities. As a result, such awards are required to be included in the calculation of earnings per common share pursuant to the "two-class" method. For the Company, participating securities are composed entirely of unvested restricted stock awards and performance-based restricted stock units ("PSUs") that have met their relevant performance criteria.
Earnings per share is determined using the two-class method, as it is more dilutive than the treasury stock method. Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the dilutive effect of potential common shares from non-participating securities such as stock options and PSUs. For the twenty-six weeks and thirteen weeks ended August 2, 2014 and August 3, 2013, potential common shares from non-participating securities were excluded from the computation of diluted EPS because they were antidilutive.
The following unaudited table sets forth the computation of basic and diluted earnings per share shown on the face of the accompanying condensed consolidated statements of income (in thousands, except per share amounts):
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
-------------- -------------- -------------- --------------
Numerator
Net income $70,008 $94,710 $30,126 $43,588
Net income and dividends declared allocated to participating (1,902) (2,612) (842) (1,284)
securities
Net income available to common shareholders $68,106 $92,098 $29,284 $42,304
======= ======= ======= =======
Denominator
Weighted average common shares outstanding - basic 148,584 157,379 148,694 156,589
Dilutive effect of non-participating securities 543 943 524 984
--- --- --- ---
Weighted average common and common equivalent shares 149,127 158,322 149,218 157,573
outstanding - diluted
Net income per common share:
Basic $0.46 $0.58 $0.20 $0.27
===== ===== ===== =====
Diluted $0.46 $0.58 $0.20 $0.27
===== ===== ===== =====
SEC Regulation G - The Company reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). However, to supplement these consolidated financial results, management believes that certain non-GAAP results, which exclude certain non-recurring charges including acquisition and integration costs, may provide a more meaningful measure on which to compare the Company's results of operations between periods. The Company believes these non-GAAP results provide useful information to both management and investors by excluding certain expenses that impact the comparability of the results. A reconciliation of net income and earnings per diluted share on a GAAP basis to net income and earnings per diluted share on a non-GAAP basis is presented in the table below:
Chico's FAS, Inc. and Subsidiaries
GAAP to Non-GAAP Reconciliation of Net Income and Diluted EPS
(Unaudited)
(in thousands, except per share amounts)
Twenty-Six Weeks Ended Thirteen Weeks Ended
---------------------- --------------------
August 2, 2014 August 3, 2013 August 2, 2014 August 3, 2013
-------------- -------------- -------------- --------------
Net income:
-----------
GAAP basis $70,008 $94,710 $30,126 $43,588
Add: Impact of acquisition and integration costs, net of tax - 572 - -
--- --- --- ---
Non-GAAP adjusted basis $70,008 $95,282 $30,126 $43,588
======= ======= ======= =======
Net income per diluted share:
-----------------------------
GAAP basis $0.46 $0.58 $0.20 $0.27
Add: Impact of acquisition and integration costs, net of tax 0.00 0.00 0.00 0.00
Non-GAAP adjusted basis $0.46 $0.58 $0.20 $0.27
===== ===== ===== =====
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Thirteen Weeks Ended August 2, 2014
(Unaudited)
As of New Closures As of
5/3/14 Stores 8/2/14
------ ------ ------
Store count:
Chico's frontline boutiques 619 1 - 620
Chico's outlets 111 5 (1) 115
WH|BM frontline boutiques 437 5 (1) 441
WH|BM outlets 61 2 - 63
WH|BM Canada 3 1 - 4
Soma frontline boutiques 243 11 - 254
Soma outlets 16 1 - 17
Boston Proper frontline boutiques 6 5 - 11
Total Chico's FAS, Inc.* 1,496 31 (2) 1,525
===== === === =====
As of New Closures Other As of
5/3/14 Stores changes in 8/2/14
SSF
---
Net selling square footage (SSF):
Chico's frontline boutiques 1,691,300 2,605 - (1,344) 1,692,561
Chico's outlets 279,612 12,008 (2,641) - 288,979
WH|BM frontline boutiques 991,553 13,298 (1,989) 817 1,003,679
WH|BM outlets 125,978 4,731 - - 130,709
WH|BM Canada 7,987 2,064 - - 10,051
Soma frontline boutiques 460,879 20,240 - (1,934) 479,185
Soma outlets 30,227 1,445 - - 31,672
Boston Proper frontline boutiques 9,424 8,852 - - 18,276
Total Chico's FAS, Inc. 3,596,960 65,243 (4,630) (2,461) 3,655,112
========= ====== ====== ====== =========
* As of August 2, 2014 the Company also sold merchandise through eight international franchise locations.
Chico's FAS, Inc. and Subsidiaries
Store Count and Square Footage
Twenty-Six Weeks Ended August 2, 2014
(Unaudited)
As of New Closures As of
2/1/14 Stores 8/2/14
------ ------ ------
Store count:
Chico's frontline boutiques 611 11 (2) 620
Chico's outlets 110 7 (2) 115
WH|BM frontline boutiques 436 9 (4) 441
WH|BM outlets 59 4 - 63
WH|BM Canada 3 1 - 4
Soma frontline boutiques 232 23 (1) 254
Soma outlets 17 1 (1) 17
Boston Proper frontline boutiques 4 7 - 11
Total Chico's FAS, Inc.* 1,472 63 (10) 1,525
===== === === =====
As of New Closures Other As of
2/1/14 Stores changes in 8/2/14
SSF
---
Net selling square footage (SSF):
Chico's frontline boutiques 1,672,225 27,963 (5,544) (2,083) 1,692,561
Chico's outlets 278,223 17,093 (6,337) - 288,979
WH|BM frontline boutiques 986,708 23,688 (9,445) 2,728 1,003,679
WH|BM outlets 121,565 9,144 - - 130,709
WH|BM Canada 7,987 2,064 - - 10,051
Soma frontline boutiques 441,387 41,387 (1,684) (1,905) 479,185
Soma outlets 32,682 1,445 (2,346) (109) 31,672
Boston Proper frontline boutiques 6,003 12,273 - - 18,276
Total Chico's FAS, Inc. 3,546,780 135,057 (25,356) (1,369) 3,655,112
========= ======= ======= ====== =========
* As of August 2, 2014 the Company also sold merchandise through eight international franchise locations.
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SOURCE Chico's FAS, Inc.
